Bound to original contract during renegotiation?

Question

I am selling a SFH and during the option period the buyer is renegotiating based on the inspection. I may be getting a higher offer from another buyer, and am wondering: am I still bound to the first buyer's original offer once they have tried to renegotiate?

Tom Gimer · Answer

In basic contract law terms, this type of response would be a counter-offer which you could reject and be free of any obligation. However, the precise language of your contract (specifically the option and inspection terms) would control the status of your transaction. Nobody can answer accurately without seeing the contract language as well as the method and content of the attempt to renegotiate.

Cara Lonsdale · Answer

This process isn't usually done through the original contract.  It's done through the inspection period, which has it's own form (in AZ, it's called the BINSR).  So, items the Buyer asks for, have no baring on the original contract, and a Seller's response only affects what the Buyer will do going forward.  It has no relevance or risk of cancellation to the Buyer.  The Seller can simply say NO, and Buyer can decide to move forward with that No.  So, it isn't a counter.  It's like a mini contract outside of the main contract that only happens through the inspection period. :)

Wayne Brooks · Answer

@Tom Gimer Admittedly I'm just familiar with our contracts but, and I assume most others are similar in that, it gives specific instances where the parties can cancel.....buyer during inspection, mtg contingency, seller can can cancel if mtg not obtained by a certain date, EM not deposited, etc.  Nowhere have I seen "seller can cancel if buyer asks for or inquires about a repair credit, price reduction, comments about the pink bathroom, etc."

To me the contract is in force unless there is an actual breach or otherwise provided for in the contract....not because you don't like someone's request, their actions, their "demands", etc.  But, that's just my opinion.

Lynn Currie · Answer

@Eric James

I think most people don't just randomly try to renegotiate - they're usually asking for concessions based on new or undisclosed information. In your case it's items that likely came back on the inspection report that are deficient (according to the report) and they want them in the pass category.

So to answer your question, I do not try to negotiate every property in my option period. I actually rarely go back to the seller and ask for a price adjustment. I usually prefer to have the current owner fix issues themselves. If they refuse, I will ask for them to pay for me to have the issues fixed. If they refuse, I determine if the property is still worth the offer price and make a decision based on that.

Eric James · Answer

Thanks everyone for your replies. My agent checked with her broker and told me what most of you have: the original contract is in force until the buyer cancels it.

This would seem to indicate that when I am buying property, I should always try to renegotiate during the option period, because I would have nothing to lose. Do you always do this when purchasing? I'm surprised I haven't read more about this on the BP forums, as it seems a valuable bit of information.

Guy Gimenez · Answer

If you have solid buyer who is ready, willing and able to contract in a back-up position, then it may make sense. If you're using a TREC or TAR contract, there are very limited ways for a buyer to terminate the contract. Bottom line is the primary buyer can still renegotiate any time for any reason, but you can always say no. I do this all the time when selling my flips. The buyer may then have an option to terminate so make sure you have your back-up contract in place before potentially losing your primary contract.

Greg H. · Answer

With Texas contracts(TREC and TAR), we do not use inspection periods, but instead use an option period.  The period give the buyer and only the buyer the right to terminate within that period.  Here is the paragraph:

23. TERMINATION OPTION: For nominal consideration, the receipt of which is herebyacknowledged by Seller, and Buyer's agreement to pay Seller $ (Option Fee)within 3 days after the effective date of this contract, Seller grants Buyer the unrestricted right toterminate this contract by giving notice of termination to Seller within days after theeffective date of this contract (Option Period). Notices under this paragraph must be given by5:00 p.m. (local time where the Property is located) by the date specified. If no dollar amount isstated as the Option Fee or if Buyer fails to pay the Option Fee to Seller within the timeprescribed, this paragraph will not be a part of this contract and Buyer shall not have theunrestricted right to terminate this contract. If Buyer gives notice of termination within the timeprescribed, the Option Fee will not be refunded; however, any earnest money will be refunded toBuyer. The Option Fee will will not be credited to the Sales Price at closing. Time is of theessence for this paragraph and strict compliance with the time for performance is

The buyer can ask for any repairs and/or price reductions during this period.  Obviously, the seller can agree, counter or reject any of the buyer's demands.  The typical outcomes are:

-Buyer does nothing and contract moves forward

-Buyer requests repairs or concessions and both parties execute an amendment

-Buyer terminates and earnest money is refunded

The buyer is not required to provide any "proof" for asking for any concessions.  personally, I am adamant that I never want to see their inspection report as I would have to disclose moving forward

Tom Gimer · Answer

I just read the TX contract materials based upon OP address and use of the word "option".

The "option" is a study period ($ is paid for this right up front) which gives the buyer the unilateral right to withdraw by X date. Such a provision would not prevent efforts to negotiate repairs/treatments as well as adjustments to the purchase price, as long as terms were agreed to before the option period expired. IMO unless there is some other material info provided, seller can say NO but cannot say BYE. Buyer has all the power.

Tom Gimer · Answer

@Wayne Brooks If the contract says you can do X or Y and the buyer attempts to do X and Y, that is arguably a breach, bad faith or a counter-offer. I believe I know which way you would argue it!

Of course taking such a position may require litigating this... and the value of the 2nd offer would obviously be relevant to that.

Bound to original contract during renegotiation?

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